December 2008: We wanted to be certain our son was born in 2008 so we could claim him on our ’08 taxes and get a pretty sizeable deduction. If he was born in ’09, we’d owe. Instead of paying extra on the car, we just saved our money that month.

The situation has now improved! My hard-working husband was promoted and has received a raise for his efforts. Hot dog!

Now that we have enough to pay off the car in full, we’re gunna.

When I login to my bank account info, the remaining balance is $5,083. That is not the “pay off balance,” however. Since we’ll be paying it off in less than 36 months (more like 18 months!), we’ll owe a 1 percent pre-payment penalty.

There’s a cool way to get around this. Mrs. Money taught me that I can pay almost all of the balance, leaving it around $1 or so. Then, I’ll owe a 1% prepayment penalty of just a few pennies, instead of the $50 it would have been right now.

I’m writing a check for $5,080. Wow. I have never written a check for that much — not even during my tuition-paying college years.

Once it clears and my car balance is down to a few bucks, I’ll call and see if they can just take the remaining bit out of our checking account and send me the title. The title. To the car that I own. What?

Make sure that the penalty is on the remaining balance, not the original or yearly average balance or such. I remembering being told that my prepayment penalty was on the original loan amount. Which is why I never prepaid my car loan. Or, they might only allow a certain amount of prepayment w/o penalty (one website I saw suggested 20% was common. IE, if you paid anything more than 20% in a year, they penalty would kick in).

Here’s hoping it really is the remaining balance, but it seems too good to be true. :(

We’re only saving about $300 in interest, since most of the interest has already been paid. But still, $300 is $300! And, not having to make that payment anymore will free up $277 per month that we can put to better use.

Thanks for the link! I will have to admit, I was a little surprised when I first read the title, but the more I read, the happier I am for you! That is so awesome. And congrats to Shane for the promotion and raise!!

You are truly a frugal inspiration — thanks for this great blog! As for the prepayment penalty tip, how incredible is that? I (and likely so many others) would have never thought to pay the balance *nearly* off, leaving a tiny amount on which to be penalized. So smart, and so frugal!!